A group of Coalition MPs are calling for the 2021 increase to the superannuation guarantee to be scrapped, arguing the increase to compulsory employer contributions will hinder Australia’s recovery from economic downturn triggered by Covid-19.
They want to prevent compulsory employer contributions rising as planned from the current 9.5 per cent to 12 per cent by 2026. The Coalition backbenchers – including first-term MPs Katie Allen and Dave Sharma, plus former employment minister Eric Abetz – claim 9.5 per cent is sufficient to fund a dignified retirement for Australian workers.
“Employers will find it very difficult to find that extra money and, perhaps most importantly, now is the time where you want more money in the pockets of Australian workers,” Allen told The Sydney Morning Herald.
But IndustrySuper Australia’s (ISA) CEO Bernie Dean says the MPs are out of touch “out of touch” with the community, based on surveys that show two-thirds of Australians back the legislated increase, and even out of touch with their own leader, Prime Minister Scott Morrison, who has already publicly quashed plans to cut retirement savings.
“The Prime Minister and Treasurer wouldn’t want to risk a generation of Australian workers being dumped on the pension to be their lasting legacy; they know we would all pay for that through higher taxes,” Dean says. “Australians overwhelmingly support the rate going up slowly as the key to dignity in retirement, giving the average Australian worker choice and control on how they live their later years.”
According to ISA, the peak body for industry super funds, failing to increase the super guarantee to 12 per cent will cost the average couple between $150,000 and $200,000 in retirement savings over their working life.
ISA points out that parliamentarians receive far more generous employer super contributions that those of workers who receive the super guarantee minimum, even at at 12 percent.
Parliamentarians who were elected after 2004 are entitled to super contributions of 15.4 per cent, while those elected before 2004 and still in continuous service are in even more generous Parliamentary Contributory Superannuation Scheme (PCSS). A 2017 report from Mercer Consulting projected that the annual cost of payments to PCSS members at $47.5 million this year alone.
The group of MPs who’re making the call to freeze the superannuation guarantee told The Sydney Morning Herald, which broke the news of the MPs views, that an increase to super contributions would come at the expense of wages and economic growth in small to medium-sized businesses.
It’s not the first time such claims have been made, as the same argument raged back in 2014 when the contribution rate was increased from 9.25 per cent to 9.5 per cent. Following that small increase, the rate was frozen by the Abbott government until July 2021 , when it is planned to increase by 0.5 per cent to the new rate of 10 per cent. However, data from Trading Economics, show wage growth has been relatively flat despite a freeze on the contribution rate, barely rising above inflation.
Despite Australia’s coronavirus-related job losses that caused Australia’s unemployment rate to rise from 6.4 per cent in April to 7.1 per cent in May, ISA argues that history shows that following the 1991 recession, a rebound in economic growth and employment coincided with an incremental but steady increase in employer contribution rate – similar to what is planned to happen now.
But veteran Victorian MP Russell Broadbent, who is in the group of Coalition MPs who want to scrap the 2021 increase, says that a rise in guarantee will cripple smaller businesses as they try to recover from the economic downturn.
“Employers will find it very difficult to find that extra money and, perhaps most importantly, now is the time where you want more money in the pockets of Australian workers,” he told The Sydney Morning Herald.
The MPs’ calls coincide with the government’s retirement income review ,which is set to hand down its findings on the merits of a compulsory super increase, among other policies, on July 24.
IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial situation, objectives or needs. That means it’s not financial product advice and shouldn’t be relied upon as if it is. Before making a financial decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services advice.
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